RealTime Economic Issues WatchWhen Should the IMF Make Exceptions? Part IEdwin M. Truman — March 31, 2015Ukraine won a reprieve from its economic and financial crisis on March 11, when the executive board of the International Monetary Fund (IMF) approved a $17.5 billion economic and financial support program, invoking the Fund's policy of providing exceptional (abnormally large) access to IMF financ ...

Working Paper 15-3Financing Asia's Growth[pdf]
Gemma B. Estrada, Marcus Noland, Donghyun Park and Arief Ramayandi
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March 31, 2015
The vital role of innovation and knowledge in Asia's productivity growth and hence economic growth makes it critical that its financial system be able to channel more funds at lower cost to entrepreneurs and new firms in the future.

RealTime Economic Issues WatchReflections on Lee Kuan YewC. Fred Bergsten — March 31, 2015In his eulogy for Lee Kuan Yew, the founder of modern Singapore, who died on March 23, President Obama said that Lee was "hugely important in helping me reformulate our policy of rebalancing to the Asia Pacific." That was no exaggeration, as I can attest from personal experience. Lee in essence p ...

Trade and Investment Policy WatchCurrency and Trade Comments by Adam S. PosenThe Trade and Investment Editor — March 27, 2015The drive in Congress to attach a ban on “currency manipulation” to the pending Trans-Pacific Partnership (TPP) is ill-advised and a “poison pill” likely to kill the TPP and other future trade deals, according to Adam S. Posen, president of PIIE.

RealTime Economic Issues WatchWho Holds Euro Assets? We Still Don't KnowKent Troutman — March 26, 2015In a 2013 working paper [pdf], Aurel Schubert—the head of the Statistical Department at the European Central Bank (ECB)—and his coauthors wrote that: "Growing current account d ...

RealTime Economic Issues WatchThe Taper Tantrum RevisitedMichael Jarand and Kevin Stahler — March 25, 2015It has been almost two years since the great "taper tantrum." In June 2013, financial markets interpreted statements by the chairman of the Federal Reserve Ben Bernanke as suggesting that a tighter monetary policy was in the offing when that was apparently not his intention. Thinking the "taper" ...

RealTime Economic Issues WatchWe Are Unsatisfied Most of the TimeEdwin M. Truman and Jan Zilinsky — March 25, 2015Pew Research public opinion surveys from 2007 to 2014 reveal that a majority of citizens in most countries are generally unsatisfied with the way things are going most of the time.1 About 30 percent of respondents in 48 countries rep ...

RealTime Economic Issues WatchFarewell to the Federal Corporate Income Tax: Part IIGary Clyde Hufbauer and Tyler Moran — March 24, 2015The first part of this blog post summarized reasons for the survival of the corporate income tax, despite its multiple defects, and explained the forces leading to its slow demise. This second part reviews the US Treasury’s response to foreign tax competition, one of the forces eroding the corporate tax structure.

Trade and Investment Policy WatchSanctions Update: Venezuela Is not RussiaBarbara Kotschwar and Gary Clyde Hufbauer — March 24, 2015The Obama administration imposed new sanctions on Venezuela last week, declaring, in a letter to House Speaker John Boehner, “a national emergency with respect to the unusual and extraordinary threat to the national security and foreign policy of the United States posed by the situation in Venezuela.”

RealTime Economic Issues WatchFarewell to the Federal Corporate Income Tax: Part IGary Clyde Hufbauer and Tyler Moran — March 20, 2015The federal corporate income tax was ill-conceived when enacted in 1909, and its negative effects have grown worse with age. It penalizes the most successful firms, discourages productive investment, drives US corporations to foreign soil, and is overly complex to administer.

Trade and Investment Policy WatchWhy International Trade and Investment Are Good for the US Economy: A Story in Eight ChartsCathleen Cimino — March 20, 2015Cross-border trade and investment are an important source of economic growth. Consumers enjoy greater access to cheaper, higher-quality, and more varied goods. Increased trade creates higher-paying jobs and leads the most productive firms and industries to innovate and raise standards of living worldwide.

RealTime Economic Issues WatchThe Incredibly Rosy Forecast of Russia's Central BankSimeon Djankov — March 19, 2015The Central Bank of Russia has published its 3-year forecast for economic growth in 2015–17. The forecast, released on March 14, is so overly optimistic that three comments are in order.

Jacob Funk Kirkegaard empirically investigates US-India labor migration and finds it to dominate permanent and temporary employment-based migration to the United States. He concludes that the 2013 Senate Bill S-744 would ease access for Indian workers to the US labor market, while making it harder for some Indian high-tech firms to operate in the US market. Working Paper 15-1.

Cullen S. Hendrix and Marcus Noland assess the state of governance reform in Myanmar and discuss outstanding challenges facing the country, particularly in the legal system, business regulatory framework, and bureaucratic capacity, as well as the potential use of external policy anchors, particularly the Extractive Industries Transparency Initiative, to strengthen Myanmar's ongoing reform effort. Working Paper 15-2.

Theodore H. Moran and Lindsay Oldenski analyze the recent reemergence of Japan as the most important source of foreign direct investment in the United States and recommend that US policy should focus on reinforcing and expanding the factors that attract high-performing firms and high-value production stages to the United States. Policy Brief 15-3.

Approval of the Trans-Pacific Partnership faces a major hurdle in the form of bipartisan demand in Congress that it address the manipulation of exchange rates; there is a way to resolve this dilemma, but it will require new initiatives by the Obama administration, Congress, and TPP partner countries, writes C. Fred Bergsten.

Chinese leaders have outlined an ambitious agenda for service sector reform, but myriad vested interests could slow or block their plans. Failure to reform and open up the service sector could seriously impair China’s growth prospects. Policy Brief 15-2 by Ryan Rutkowski.

Seven years after the start of the global financial crisis in 2007, the prospect of secular stagnation threatens to fracture the political and social fabric of the euro area. A PIIE Briefing of six essays by economists at the Peterson Institute for International Economics offers a roadmap for policymakers to guide Europe out of its current self-defeated policy mix.

Most forecasts for emerging and developing economies reflect excessive optimism that is both statistically significant and economically relevant, according to a study of forecasts for horizons of up to 20 years in more than 100 countries. Policy Brief 14-26 by Giang Ho and Paolo Mauro.

Kevin Stahler and Arvind Subramanian find that there has been a deterioration, not improvement, in competitiveness in the eurozone periphery countries, and the pattern of adjustment within the eurozone between 2007 and 2013 has been dramatically perverse, with Germany's competitiveness having improved by 9 percent and Greece's having deteriorated by 9 percent. Working Paper 14-10.

William R. Cline finds that all four of the major economies—China, the euro area, the United States, Japan—remain close to their fundamental equilibrium exchange rates (FEERs); however, a continued decline in the euro and the yen could push the US economy to an excessive deficit. Policy Brief 14-25.

Theodore H. Moran identifies the most important market failures and impediments that hinder the spread of supply chains in developing economies and examines how some host governments have been successful in overcoming these obstacles. Working Paper 14-12.

Avinash D. Persaud explains why bail-in securities are fool’s gold and do not make sense in the more common and intractable case where many banks get into trouble at roughly the same time as the assets they own go bad. Policy Brief 14-23.

In NAFTA 20 Years Later, part of a new series of publications called PIIE Briefings, Institute scholars and experts assess the record two decades after the approval of the North American Free Trade Agreement.

Roberto Alvarez and José De Gregorio analyze the resilience of Latin American countries to the global financial crisis and find that effective macroeconomic policies were key to good economic performance. Working Paper 14-11.

TPP AND CURRENCY

Adam S. Posen explains why enacting a ban on "currency manipulation" is ill-advised—and why such a move endangers the negotiations for the Trans-Pacific Partnership (TPP) between the United States and 11 other countries.

TRADE AND INVESTMENT

The benefits to the US economy from cross-border trade and investment are narrated and visualized through eight charts. They focus on the significant growth of two-way trade and investment, higher earnings in export-intensive industries, and the changing nature of trade in a globalized economy.